Epsilon Apparel

• Epsilon Apparel is evaluating the cost structure of two products: Shirt and Pants.
• Shirt: Direct materials - $50,000, Direct labor - $25,000, Overhead - $12,000
• Pants: Direct materials - $70,000, Direct labor - $35,000, Overhead - $18,000
• The company applies overhead based on direct labor hours. Total direct labor hours: 5,000. Shirt uses 2,000 labor hours, and Pants uses 3,000 labor hours.

Requirement: Calculate the total cost for each product using traditional costing and compare it with the ABC method. Discuss the impact of the costing method on product pricing and profitability.

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